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01 December 2016

European Commission adopts rules to strengthen regulation of commodities markets

The European Commission has taken important steps today to strengthen the regulation of commodities markets and curb price speculation.

The package completes the rulebook of secondary measures under the revised Markets in Financial Instruments Directive, known as MIFID II, and gives market participants time to prepare for its application, as of 3 January 2018.

In particular, the Commission is adopting regulatory standards that will define parameters for competent authorities to determine "position limits", i.e. the maximum amount of commodity derivatives that can be held by a single trader, and which represent a tool to help to limit commodity speculation, support orderly pricing and prevent market abuse. The new rules also ensure that large non-financial firms trading a large amount of commodity derivatives are regulated under MiFID II (through the so called “ancillary activity test”).

Valdis Dombrovskis, Vice-President for Financial Stability, Financial Services and Capital Markets Union, commented: “Today's rules will contribute to better functioning commodities markets that work for the real economy while helping to deal with some of the problems we saw in the financial crisis. We have listened to the concerns raised by the European Parliament and provided for stricter position limit standards whilst at the same time seeking to avoid unintended consequences."

Philip Hogan, EU Commissioner for Agriculture stated: "Today's move ensures the effective functioning of futures markets for agricultural products and offers the possibility to hedge risks."       

The's package consists of two Delegated Regulations are part of the MiFID II rulebook and are based on the draft regulatory technical standards of the European Securities and Markets Authority (ESMA). With the  adoption the Commission has put in place the two final pieces of the 28 regulatory standards that ensure the application of MiFID II as of 3 January 2018.

The Council and the European Parliament have three months to approve or object to the two standards.

Updated rules for markets in financial instruments: MiFID 2

Updated table of level II measures under MiFID

© European Commission

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